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Here Is What RBI Has To Say Regarding the Loan Waiver

The loan waiver of Rs 30,000 crore will affect the state fiscal and ‘impact the credit discipline’ among borrowers, according to experts. Eleven days after farmers protest, the Maharashtra government has announced a farm loan waiver for small and marginal farmers on Sunday.

According to India Rating report, the impact of the waiver will be felt over a period of time, although it will push up states’ fiscal deficit to 2.71 per cent as against 1.53 per cent budgeted for the fiscal year 2017-18. The rating company estimates that the debt burden will rise 17.44 per cent against 16.2 per cent estimated for the fiscal year 2017-18.

Maharashtra is the second BJP government governed state after Uttar Pradesh to have announced a farm loan waiver.

Soon after BJP won an election in UP, the state government had announced a farm loan waiver of Rs 36,359 crore.

A day after UP government had announced a waiver, governor of the Reserve Bank of India (RBI) Urjit Patel, had denounced it. Patel said that due to farm loan waivers, overall borrowings of the government would go up and that can lead to crowding out private borrowers and increase the cost of borrowings for others.